I met my wife almost ten years ago, back when she was completing her doctoral degree in psychology. We were both living in Florida. I was working on boats, she was going to classes, we were both ardent students of human behavior. Most of my learning came from books and observation. She had the same tools at her disposal, but more: formal classes, practicums, in-patient hospital experience, an undergraduate degree. In short, she knew a whole lot more about human psychology than I did (and the gulf has only yawned wider since).
However, I did have one advantage. While we both were firm believers in biological evolution, I viewed all human behavior through the lens of this remarkable theory. Whenever I needed to determine why someone did or said something, I looked for a root cause, a bigger picture, the evolutionary framework. As a clinical psychologist, my wife was looking more proximally. How could she help this individual? What behavior did she want to reinforce or diminish? How best to accomplish this? To this day, whenever we debate human nature, we find ourselves having two disparate conversations. I want to discuss global perspectives, facets of humankind, while she wants to talk about how these features are evident in the two of us and the interplay of our relationship.
Neither stance is right or wrong. It would be like saying macroeconomics is more important than microeconomics. I am curious about universal truths; she is eager to improve the lives of individuals. If I had to be objective, I’d say hers is the more humane and reasonable stance. It is her profession, and she’s damn good at it.
But ten years ago, the larger framework stuff had not yet been incorporated into her worldview. I remember one conversation we had about her love of dance clubs. It went something like this:
My Wife: “Me and the girls are thinking about going clubbing tonight.”
Me: “Ah, that old mating ritual, eh?”
“What? It has nothing to do with mating, you ass. It’s just fun!”
“What does that even mean? Just fun? Things are enjoyable to get you to do them more often, not because the universe wants you to enjoy shit just to enjoy it. You go out with little on, shake your butt, and it makes men want to breed with you.”
“It’s not like I’m going to go home with anyone.”
“That’s because your frontal lobe will intervene. So long as it isn’t pickled in martinis.”
“No. I don’t think that’s going on. Dancing is just fun. It has nothing to do with mating rituals. I don’t even want kids!”
We probably had a dozen variations of this conversation, only with her calling me an “ass” with greater frequency. Ten years later, and I am betting that she finds herself on the opposite side of the argument as she talks to her college aged clients. It isn’t so much that I was right and she was wrong, it’s that I was on the outside and she was on the inside. It’s difficult for us, who are possibly acting against reason and our best interests, to admit that evolutionary pressures are tugging our strings like a grand puppeteer. It’s just as often these days that my wife points out the true root of my own nonsensical behaviors. And I often have to sheepishly agree with her.
So this is how I look at the world: I am constantly trying to ascertain the function of things and people. I want to know how machines operate, how the cogs move, and I want to know what drives our actions. Lately, it’s been the Occupy Wall Street kids who have fascinated me. There’s something . . . off about their motivations, and I think I finally put my finger on it. So let me tell you about this classic study in game theory known as Ultimatum.
Ultimatum is a simple game. There are two players and a lump sum of money. Player 1 chooses how the money is to be split. Player 2 gets to accept or reject this offer. For instance, Player 1 is presented with $100. They decide to split the money 60/40. Player 2 accepts, and gets to leave with $40 while Player 1 takes $60.
What’s interesting about Ultimatum is that Player 1 tends to split the money pretty near even. Close to 50/50. This game has been played out thousands and thousands of times with as many participants, and in dozens of cultures. The results are pretty damn consistent. If you have Player 1 perform an unfair split, Player 2 will reject the offer, and both walk away with nothing. Player 1 seems to intuit this without ever having played the game before, so tries to give a fair deal. There are variations that entail playing over and over and splitting roles and what-not, but the basic game reveals something about our sense of fairness. But it also displays something more interesting: our willingness to diminish our own wealth if it means punishing another for being unfair to us.
Whenever Player 1 tends to offer less than 20%, the deal is called off. I find this fascinating. It is illogical on the surface. Player 2 is better off with $20 than nothing. But he or she would rather have nothing than know that they’ve been had. It would be unbearable to know that someone walked off with $80 and got away with an injustice. (Also, there’s the desire to set up standards of fairness, to not be a pushover, and other theories of reprisal and social pressure).
This is at the heart of class envy, which is at the heart of class warfare. Now, before I go any further, allow me to divulge some of my political and economic positions. I think the wealthy should pay a lot more in taxes than they do now. I could get pretty extreme with this, suggesting a return to the 80% tax bracket for the wealthiest. And by “wealthiest,” I mean people making over $1,000,000 dollars. The current $250,000 line has been made ridiculous by inflation. I also think the banks should have been allowed to fail. See? Pretty damn extreme. So, when I expose the Occupy kids and explain their root behavior, it isn’t because I ideologically disagree with them. It’s because I am ethically and emotionally superior to them. But I’ll get to that in a moment.
Occupy Wall Street is a huge rejection of a colossal game of Ultimatum. Simple as that. The results of game theory are universal because the tendencies they reveal are hardwired into our DNA (and that of other animals, who often test the same in similar games). What happened is this: Capitalism created a big pot of money. Player 1 is made up of all the people in control of this money (investment bankers, CEOs, board of directors, politicians, union leaders, etc…). Player 1 chose a 90/10 split. A bunch of people are now rejecting this.
This is a pretty neat and powerful explanation for a behavior that even the people involved have a hard time putting into words. You see, they are in a similar situation my wife was in while she tried to rationalize her drive to reproduce by saying that “dancing was fun.” The Occupy Wall St. kids are motivated by anger. Frustration. Hostility. They don’t know where this is coming from, so they have to rationalize it. They make up stories that seem to match their emotions. But their emotions are simple to explain. They feel jilted. Taken advantage of. They know they are receiving something, but not a big enough slice. They want more, damnit, and here is where my respect for their movement wilts in a cloud of pepper spray.
To put it bluntly, these kids are hypocrites. They are angry that someone else is wealthy, not them. They are pissed because the knowledge that other people have lots of money makes it impossible to enjoy the much smaller slice they’re left with. They want more, more, more. Or, failing that, they want to burn the entire thing to the ground. Without a fairer split, Player 2 chooses to reject the deal altogether. It’s much like an ex-lover who justifies killing his former sweetheart because “If I can’t have her, no one will!”
Capitalism works. Even the bastardized form we practice in America, where subsidies, complex tax shelters, unfair trade practices, a managed currency, and other obstacles make our economy a ghost-like approximation of true capitalism, the result is difficult to deny. Exhibit A: Poor people in this country are free to be fat! They can afford to indulge, can work without getting exercise, and can entertain themselves on their butts. The obese couch potato is the ultimate victor in the evolutionary struggle of life. He is a big, fat (ahem) “Fuck You” to nature. The ultimate “I win!” Finally, we have overcome the struggle for resources and have met a new struggle: learning to forego immediate self-gratification.
The result of capitalism is a standard of poverty that outclasses the lifestyles of world leaders a century ago. We have wiped out diseases that could strike down a king or queen. We have instant communication, dumpsters full of food, ridiculous transportation options, and social safety nets unheard of 100 years ago. These are the delicious scraps. This is the 10%. These are the crumbs, which are boulder-sized and have ushered in an era of hedonistic joy and security for even the poor. To deny this is to display ignorance for what the poor endured a century ago. They were recognizable for exposed ribs, in America, rather than clogged arteries.
This 10% has given me the ability to sit here in a warm cave, pecking away at a miracle device, with hundreds of channels of gladitorial entertainment, electricity on demand, devices to wash my dishes and clothes, and a box to hear my mother or father’s voice. I have cold mastered in one machine and hot water flows with the twist of a knob. Henry VIII, if resurrected and shown my 850 square foot abode with its sundry of miracles, would worship me as a god. (He would probably cut my head off and steal it all, but he would be insanely envious of what I possess.)
So here’s where the Occupy Wall St. kids get it wrong. Could the system be more fair? Sure. Tax the wealthy. Let the banks fail. I was for these things before any fringe group stumbled upon the reasonableness of the ideas. But to blame a system that brings wealth is to deny the riches it has brought you, even in smaller slices, simply because envy is clouding the brain. The obsession with those who are taking the 80%, 90%, even 99% is irrational if it requires discarding the thing that is lifting all standards of living. It is an observable fact: no other system of economics results in the increase of wealth across the entire system like capitalism. It is also a fact that this spread is not perfectly even. My attitude? Who the fuck cares?!
Grow up. Be more mature than the asshole bankers and fatcat CEOs. You know what? The only reason they might (might) be happier than you is because they have less dirty envy in their hearts. As soon as you let that go, I promise you, you’ll be better off than any of them. Don’t have a job? Take any one you can find. Two of the best years of my life were spent roofing, an occupation of pure toil and torture. But I was free, in good company, making things with my hands, and going home at night exhausted, satisfied, and not wanting for anything. I have captained yachts for billionaires who weren’t nearly as happy. And the secret had nothing to do with keeping up with them, but with ignoring them.
There are so many improvements to be made with our system, but tearing it down is the worst thing we could do. It would be out of spite and motivated by envy. And ironically, performed by a bunch of kids who probably think they are Buddhists to some degree or another. This will always be a game of Ultimatum. If you find yourself saying “We should fuck ourselves to teach them a lesson, to force them to give us more, more, more,” then you are what you are. If you’re comfortable with that, I can only be sad for you. Me? I know something many don’t. If you move the people around in the experiment, if you let the prisoners become the guards, or the shockees the shockers, the results will play out the same. Shower those kids in that park and put a suit and tie on them, and they would run the banks the exact same way. Neither side is any better than the other. Both are salivating over the same big pie, wanting as much of it as possible while doing the very least they can get away with.
And I’m gorging myself contentedly on the crumbs.
5 replies to “The Ultimatum Game on Wall Street”
Hugh great post. I haven’t really been following the protests much, but fascinating insight into them. I do have a question about this though. Please pardon my ignorance on this matter. Not sure I agree with ” Player 2 is better off with $20 than nothing.” except in the case where only one offer is ever made. In reality we are faced with these choices frequently.
You started off explaining that all of our behaviors can be examined through the lens of evolution, which I agree with. Doesn’t this also explain “But it also displays something more interesting: our willingness to diminish our own wealth if it means punishing another for being unfair to us.” and the behaviors of those wall street kids? It would seem to me to be a fitter choice from a natural selection aspect to reject the low-ball offer. Over time those who are accepting less will be at a disadvantage and be selected out. By rejecting now, it would make logical sense that further offers would be higher, thus increasing ones reproductive fitness. This of course would happen naturally over time. It’s not to punish those with more, but instead to help insure our own reproductive fitness. Really aren’t the protesters just acting according to natural evolutionary conditioning even if they don’t realize it? Or am I missing the whole point here? :)
Absolutely, Devon. They are absolutely acting according to their evolutionary drives. And there is a very good chance that the result of their actions will be more spoils and riches in their pockets, and less in those of “Player 1” or the Alpha Males running the banks. I probably should have been more explicit that this is indeed the case.
My observations are meant to highlight this very thing: the “why” of their doing what they are doing. They want more resources. More money. And they would rather punish and have everyone receive nothing than put up with any inequality. This behavior is seen in other animals where group altruism is reinforced and reciprocated. Vampire bats share food (coagulated blood) with only those vampire bats that have shared in the past.
But biological explanation is not ethical recommendation. I caution against the naturalistic fallacy. It would also be beneficial for a step father to rip the limbs off a child and hurl his body from the highest limbs, which is what many primate Alphas do after assuming control of a group. It puts the females back in estrus and paves way for his progeny, not those of his former rival.
But is this good? I think not. Just because something benefits an individual or subgroup, evolutionarily, it should not be applauded. We should sit down and reason it out. Employ our higher faculties. It is this conflict of my higher faculties and my emotional response to the Occupy kids that set the entire investigation and hypothesis in motion. I understand their emotional response. I think it is illogical. To castigate capitalism, a system of private ownership and exchange that has enriched all our lives, simply to punish those who have benefited quite more, is an act of passion, not compassion. These kids want more. My argument (and way of living) is that there is far greater happiness to be found than in upgrading our gadgets, having that perfect job that gives the most money for the least work, shrouding ourselves in material trappings, owning large homes, and all the hypocritical crap that these Buddhist hippie wannabes decry while pining for.
I stand by the assertion that the kids in that park and the men and women in those boardrooms are interchangeable. The fact that one group hates the other while that group fears the former in return, is laughable. There is no difference. The greed on Main Street contributed equally, in my opinion, to our economic morass as the greed on Wall Street. That’s why I can’t pick sides in this silly fight. I am the 1%. The person who did everything rational and sanely, and am caught between the fight of the 99%, the Wall and Main street baffoons who are all rewarded for their greed, whether by bailouts or tax benefits or bankruptcy protection or the ability to walk away from a debt without honoring it.
A pox on them all.
I enjoyed reading this post. I’ve described the OWS situation as a huge game of Ultimatum as well and wondered if others were making the same observation (I found your post searching google for “occupy wall street ‘game theory'”). However, I have a slightly different take on the OWS movement. I agree with a lot of what you say, but I think it’s a bit simplistic to depict this entire movement as “kids” who “are angry that someone else is wealthy, not them…” Although I think that description is probably accurate for a fair number of them (maybe even the bulk of them), there are many involved who are not upset because someone else is wealthy, but that many of these “people” continue to enrich themselves by privatize profits and socializing the risk . I would also say that one should not assume that all of these folks are anti-capitalist. I’ve seen quite a number of youtube videos where the OWS person being interviewed emphatically states that they are not anti-capitalist, but rather anti-crony capitalism. I must also respectfully disagree with the assertion that “main street” contributed equally to the economic meltdown. Not because I don’t think some were greedy (they may all be greedy, who knows?), but because Capitalism does not allow for it. One who has little capital has little leverage and therefore cannot impact the economic system to the same degree-no matter how greedy that person happens to be. Personally, I believe a better understanding of the root cause(s) can be had by framing it as a “Minsky moment,” as illustrated in Minsky’s financial instability hypothesis. Anyhow, again, I enjoyed the post and appreciate your perspective.
You weren’t very subtle, and exposed your disingenuous stance of “sympathy” for the Occupy movement the minute you dropped the straw man of “They know they are receiving something, but not a big enough slice. They want more, damnit, and here is where my respect for their movement wilts in a cloud of pepper spray.”
Funny how repetitious this gets, these character assassinations of Occupy. I bet if I did a data search, I’d find a really clear family tree of media outlets to trace these attacks back to some Right Wing think tank or PR firm. They’re just too uniform and simplistic to be arrived at by the same demographic without some kind of “pied piper” shaping perceptions. If they are unique, then they’re all screaming with the subtext of a bias toward capitalist apologetics, whatever supposed “liber” or “leftist” individual beliefs the apologist supposedly holds at the same time (as if this gave any real credibility).
Just listen to your vocabulary in this piece, and your bias should be as clear yo you as the rest of us:
According to you, these “hypocrites” are all “spoiled youth” who should “grow up” and realize “the system works”. This sled of adjectives and perspectives against a demographic, more than the embellishments of the pseudo math and science you rolled out rhetorically (instead of mathematically or scientifically in the strictest sense), are the heart of this post. In other words, this is you attacking these people and trying to hide behind game theory. That’s as funny as it is sad, and shows how plastic game theory is if any old fool can claim that there’s a mathematics underpinning their political sympathies.
Honestly, you would have spent your time more effectively examining why YOU feel threatened by the “youth” you perceive to be the backbone of the Occupy movement, and why your demographic feels compelled to rationalize such fear by painting them as abject hypocrites, no matter how many mental contortions are necessary.
You see, “these are youthful hypocrites who don’t understand simple scientifically irrefutable game theory” is YOUR personal rationalization, one that more closely resembles the “dancing is fun” case you posed, whereas “dancing is fun” had no bearing on Occupy in the sense you offered it.
You see, YOU ARE INSIDE THE SYSTEM, and have internalized its perspectives. You have accepted the domestication of your aspirations, and adopted the goals and aspirations that the system selected for you; you have rationalized this as “inevitable” and “wise”, and see those who reject this authority as “less than me”: in an evolutionary sense, an intellectual sense, even in terms of personal maturity.
The irony, of course, is that you can’t see your own forrest for your own trees, and that’s why a movement answering the fears of a system predicated on personal financial gain through legalized theft and abuse, with a message of moral responsibility, is so threatening to you. You have abandoned your moral center for the blinders that you have to wear in order to function in this system.
This blog is the reinforcement of those blinders, instantly apparent in your choice of premise: “they want some for them, but for free”.
How can that be anything other than an uncritical, hyper-biased partisan view that comes from the opposition? Your feint at sympathy, at “I’m totally liberal and lefty guys, seriously” is utterly disingenuous, and your mischaracterization of Occupy is the “tell” that undermines your bluff. Anyone with a modicum of education can detect that this is the opposite of the ethical and political positions expressed by a movement entirely concerned with human rights, and critiquing a system of deadly abuses fueling constant humanitarian crisis across the globe, decade after decade, to produce artificial levels of wealth and “growth” that cannot exist without devastation.
This movement is literally about a system that fuels and engineers war, death, poverty and disease — not a system that counteracts it.
Why you rationalize your fears of Occupy are obvious to some degree. Your proclamations that “capitalism works”, and judgement that this is a point of moral maturity, signifies that you’ve bought into a system that is corrupt, that makes human sacrifices of the majority for the wasteful narcissism of the few.
OCCUPY DOES NOT WISH THAT WE COULD BE THE FEW. We would rather that ALL HAVE WHAT THEY NEED, EVEN IF ITS HUMBLE, than to see kings and pharaohs rise in the finance sector surrounded by a desperate army of middle class servants (YOU) held hostage to turn the other cheek while they wage profitable wars on the backs of the poor, like the 5.4 million dead in the Afghan genocide of the last decade, and the millions dead in Iraq, for oil, opium, and natural gas.
PAY ATTENTION BECAUSE YOU’RE TOO OLD TO FIGHT IN A WAR: We don’t want to be the generation that committed the holocaust for our parent’s stock portfolios. Pretty simple. Capitalism as we practice it does not work. Its not the capitalism of Adam Smith; its a neoliberal construct of dubious moral or practical maturity.
We’d rather try to build a world on the ethical framework that “An injury to one is an injury to all”, because we think THIS is a step in a more evolved direction than the status quo.
You should pull your head out of your ass and respect that fact, instead of showing what a frightened dinosaur you are by shoveling this pile of panglossery culled from some “Bayesian Theory for Unrepentant Bourgie Boomers” book you found.
The ethical high ground is WITH the critique of the exploitative and deleterious distortions of capitalism, and not on the side of the apologists for capitalism.
“This movement is literally about a system that fuels and engineers war, death, poverty and disease — not a system that counteracts it.”
Capitalism has done more to eradicate poverty and disease than any other system in the history of mankind.
And look, the anger and all is refreshing. You seem passionate and concerned, and I hope you’ll direct this into some sort of direct service for your fellow man, but you don’t know a single thing about me. Stop presuming.